Under the Insolvency and Bankruptcy Code, a Company whose name has been removed from the Register of the Companies can be liquidated: NCLAT
The National Company Law Appellate Tribunal (NCLAT) ruled that the Company, whose name has been removed from the Register of the Companies can be liquidated under the Insolvency and Bankruptcy Code (I&B Code). If a proceeding is initiated under Sections 7 or 9 of I&B code, procedure of ‘Corporate Insolvency Resolution Process’ is to be followed.The name of Elektrans Shipping Private...
The National Company Law Appellate Tribunal (NCLAT) ruled that the Company, whose name has been removed from the Register of the Companies can be liquidated under the Insolvency and Bankruptcy Code (I&B Code). If a proceeding is initiated under Sections 7 or 9 of I&B code, procedure of ‘Corporate Insolvency Resolution Process’ is to be followed.
The name of Elektrans Shipping Private Limited (Corporate Debtor) was struck off by the Registrar of Companies on in exercise of powers conferred by Section 248 of the Companies Act, 2013 (Companies Act). Mr. Pierre D’silva, a shareholder of Elektrans Shipping Private Limited filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
According to the appellant, the application under Section 9 of the I&B Code was not maintainable and the NCLT erred in admitting the application without considering the status of the Corporate Debtor. Elektrans Shipping Private Ltd. preferred an appeal challenging the order.
Further, the NCLAT held that liquidation of assets of the ‘Corporate Debtor’/ Company is not the object. The object is to revive and rehabilitate the Corporate Debtor by way of Resolution and maximization of the value of assets of the Corporate Debtor and balancing the interest of all the stakeholders.
Before passing an order under for removing the name of the Company from the Register of Companies, the Registrar has to satisfy himself that sufficient provision has been made for realization of all amount due to the company and for the payment or discharge of its liabilities and obligations within a reasonable time and, if necessary, obtain necessary undertakings from the Managing Director, Director or other persons in charge of the management of the Company.
The NCLAT held that the Adjudicating Authority i.e. the NCLT is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of Corporate Insolvency Resolution Process under Sections 7 and 9 of the I&B Code based on the application, if filed by the Creditor or workman within twenty years from the date the name of the Company is struck off under Section 248 (5) of the I&B Code. In the present case, application under Section 7 having admitted, the ‘Corporate Debtor’ and its Directors, Officers, etc. were deemed to have been restored.
The Tribunal has a dual role to play. On one side it plays role of ‘Adjudicating Authority’ and on the other ‘Tribunal’ under the Companies Act.
NCLAT held that Section 248 of the I&B Code shall not affect the power of the Tribunal to wind up a company, the name of which has been struck off from the Register of Companies. It further held that in the case where the name of the company has been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. In such case and in view of the provisions of Section 250 (3) read with Section 248 (7) and (8) of the I&B Code, the application under Sections 7 and 9 will be maintainable against the ‘Corporate Debtor’, even if the name of a ‘Corporate Debtor’ has been struck-off.
Thus, in the present case, application under Section 7 of the I&B Code, the ‘Corporate Debtor’ and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act.